South Africans seem almost schizophrenic about the value of small business for economic growth. On the one hand, almost everyone seems to be banking heavily on small and medium-sized enterprises (SMEs) becoming the engine for new jobs. But making life easy for people wanting to start these things isn’t a priority.
With Statistics SA putting full unemployment at over 36% of adults, every national plan since 1994 has put entrepreneurship front and foremost of the country’s chances of getting anything like jobs for all. The current national development programme wants unemployment down to 6% in just another 17 years, requiring a reversal of trends these decades past.
Yet, as a critique of the SAIRR points out, “The proposal for more ‘effective regulation’ of labour placement agencies could reduce the ability to create jobs”. It also warns that “seeking union agreement on ‘entry level’ wages merely invites them to continual filibustering”.
For its part, policy research NGO the Small Business Project (SBP) sees SME growth as the “key propeller of job creation”.
But it wonders how serious we are about making it easy for the propeller to turn, pointing to a Global Entrepreneurship Monitor finding that SA comes stone last among developing economies for job creation through SME’s. Where Brazil has 15% of adults in early stage business start-ups, or with young firms, and another 15% in SMEs older than three-and-a-half years, for us the proportions are only 7% and 2%.
The SBP says that what holds us back in this regard is poor public education, a lack of demand for SME services, a shortage of business skills, and labour regulations stifling job creation.
The DTI, licking its wounds from having to temporarily withdraw a draconian new business licencing law, is putting lots of energy into getting established formal business to promotes “enterprise development” through broad-based black economic empowerment codes of conduct that seek to force business to spend fully 3% of net profit after tax on enterprise development, mainly by getting SMEs to be a big part of normal business supply chains.
This add-on “voluntary” tax is in addition to them spending 1% of after tax profit on straight social investment, normally in funding the good works of NGOs, schools, and the like.
Yet running a profitable business can be difficult enough without having to add the creation of SMEs for others to run to the mix. Douglas Racionzer of the cross-country SME-facilitating Small Towns Rejuvenation Project calculates that SA’s top 100 companies spend just over R2bn a year on enterprise development, where the DTI would have them spending more than R15bn.
Some, such as Anglo American through its Zimele programme that has funded 800 successful start-ups the past 20 years, are systematic about this, but others may wonder how the notoriously difficult job of also becoming small business promoters should be their sudden-found talent.